Presented by iPOSSIBLE INC.

Zahra Bajhiran, Jill Chi, Laura Feja, Jason Oakley, and Kyle Thoresen
1

OVERVIEW
RCFSs Operation Opportunities Existing Floor Layout Objectives Customer Survey and Observations Department Earning Power Operational Improvement Opportunities Possible Floor Plan Alternatives Recommended Floor Plan New Floor Plan Sales Projection
2

RCFS BACKGROUND
Specialty grocery store located in Orange County Open since 2004 Medium size: ~27,000 square feet Shopping area: ~16,000 square feet Annual growth rate of 10% since opening

RCFS STRATEGY AND FOCUS

Providing specialty grocery items to serve diverse O.C. immigrant population Both stores located in affluent neighborhoods Minimum advertizing, relies on word of mouth Lowering labor needed by sub-contracting food island and pastry

RCFS STRENGTHS
Loyal niche customers (Persians) Ability to attract other ethnicities in addition to Persians Provides variety of merchandise from different countries Bakery International food court and dining area

FACTS
RCFS Weekly sales Size (shopping area) Customer Count per Day ~$500,000 ~16,000 ft2 3,000 Industry $333,535 0.637 x 46,000 = 29,302 ft2 1,725

Customer ticket (based on weekly sales)

Sales/ft2 (shopping area)

$23.84
~$31

$27.61
$11.39

Source: www.fmi.org

RCFS OPPORTUNITIES
Problem areas: Cycle time is high due to traffic congestions Customer flow is imbalanced Sales per customer less than industry average Center store challenge

EXISTING LAYOUT

RCFS OBJECTIVES
Reduce the cycle time by removing bottlenecks Improve the flow, Free more space Increase sales per customer Direct customers to the center of the store Achieving objectives results in the increase of customer satisfaction and ultimately sales
10

STORE SALES VERSUS AREA

35.00% 30.00%

25.00%

20.00%

15.00% % Total Store Sales 10.00% % Total Store Area

5.00%

0.00%

11

CUSTOMER SURVEY

12

CUSTOMER OBSERVATION

13

CUSTOMER SURVEY

14

CUSTOMER OBSERVATION

15

EARNING POWER

EP = 10,000

Sdept.(1 + Pdept.) Afloor

EP = Earning Power Sdept. = % of total store sales Pdept. = Profit Margin (%) Afloor = Floor Area Department Occupies
16

EARNING POWER
Relative "Earning power" of RCFS departments2 Department1 % of Sales Est. Floor Area (ft2) Est. Profit Margin (%) Earning Power3 633 Meat 9.0% 45% 100 2,475 Produce 20.1% 33% 52 2,573 Hot food Area 17.0% 30% 42 967 Dairy 6.8% 17% 40 4,858 Remaining Aisles4 27.2% 25% 34 418 Frozen (Aisle 7) 2.0% 37% 32 1,486 Taxable items (Aisle 5/6) 3.9% 35% 17 809 Bread 1.0% 22% 7 Miscelaneous 13.0% 1,455 Checkout (cash reg.) 627 Eating Area Total Floor Area 100.0% 16,300 31% 39 1) Not all departments included AVG 2) Sales and margin are estimates (Lopez, 2010) 3) Normalized to largest "earning power" - meat dept. 4) Aisles 1 - 4, 8 (Profit Margin estimated) 17

OPERATIONAL IMPROVEMENT OPPORTUNITIES

1) Increase Sales per Customer - Cross merchandising: encourage sales of related products - Strategic product placement: use endcaps more effectively - Advertizing/ promotions - free space helps

18

OPERATIONAL IMPROVEMENT OPPORTUNITIES

2) Reducing Cycle time: process faster - Add registers in hot foods dept. - Navigational Aids - Scanners at checkout must recognize international bar codes - 20% of the items require manual input
Reducing cycle time is crucial
RCFS probably in this vicinity during busiest times?

This barrier will rise if cycle time reduced

Store Sales

19
Customer Flow

OPERATIONAL IMPROVEMENT OPPORTUNITIES

3) Reconfigure store layout to: Increase free space Improve customer flow Increase customer satisfaction

Focus: Produce section

20

ALTERNATIVE 1

21

ALTERNATIVE 2

22

ALTERNATIVE 3

23

RECOMMENDED LAYOUT

24

SALES PROJECTION

Store Sales Increase (%) = 100

(Aeffect Vcustomer Bf Sopp. ) + Tcustomer Tcustomer

Sopp. = Sales Increase Opportunity Aeffect = Store Area Effect Vcustomer = Customer Flow Factor Bf = Store Busy Factor Tcustomer =Average Customer Ticket
25

SALES PROJECTION

Store Sales Increase (%) = 100

(Aeffect Vcustomer Bf Sopp. ) + Tcustomer Tcustomer

Sopp. = Sales Increase Opportunity = 30 - 23.80 = $6.20 Aeffect = Store Area Effect = 0.50 Vcustomer = Customer Flow Factor = 1.3 Bf = Store Busy Factor = 0.50 Tcustomer =Average Customer Ticket = $23.80
26

Customer Flow Factor (current plan)

27

Current Plan
Dept. Length (in) Width (in) Area (ft2)

1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Cheese
Hot foods Cake Eating area Aisle 7/8 Aisle 6/7 Aisle 5/6 Aisle 4/5 Aisle 3/4 Aisle 2/3 Aisle 1/2 Cash Reg. Meat 1 Meat 2 Produce 1 Produce 2 Produce 3 Produce 4 Sangak Misc. Items Total Entity Area Total Floor Space Total Free Space % free space

272
352 420 420 60 60 49 49 49 49 49 767 440 304 1,160 187 117 85 255 139 -

230
532 197 215 916 924 963 963 963 963 856 203 120 75 75 90 45 112 165 118 -

434
1,300 575 627 382 385 328 328 328 328 291 1,081 367 158 604 117 37 66 292 241 8,268 16,317 8,049 49.3% ==> Assume 3% of total floor area

28

Customer Flow Factor (recommended plan)

29

Recommended Plan
Dept. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Cheese Hot foods Cake Eating area Aisle 7/8 Aisle 6/7 Aisle 5/6 Aisle 4/5 Aisle 3/4 Aisle 2/3 Aisle 1/2 Cash Reg. Meat 1 Meat 2 Produce 1 Produce 2 Length (in) 65 352 420 420 60 60 49 49 49 49 767 440 52 1,200 52 Width (in) 428 532 197 215 916 924 963 963 963 832 203 120 375 75 364 Area (ft^2) 193 1,300 575 627 382 385 328 328 328 283 1,081 367 135 625 131 ==> seven 52" square pallets ==> spices/wine go with meats ==> deleted island

17
18 19 20 21 22 23

Sangak
Misc. Items Total Entity Area Object Area Gain/Loss Total Floor Space Total Free Space % free space

255
139 -

165
118 -

292
294 7,655 -614 16,317 8,662 53.1% ==> Assume 4% of total floor area

Free space increase = 8,662 / 8,049 1 = 7.6%

30

SALES PROJECTION

(0.50 x 1.3 x 0.50 x 6.20) + 23.80

Store Sales Increase (%) = 100

= 8.5%

23.80

Sopp. = Sales Increase Opportunity = 30 - 23.80 = $6.20 Aeffect = Store Area Effect = 0.50 Vcustomer = Customer Flow Factor = 1.3 1.076 too conservative Bf = Store Busy Factor = 0.50 Tcustomer =Average Customer Ticket = $23.80
31

SALES PROJECTION

(0.50 x 1.3 x 0.50 x 6.20) + 23.80

Store Sales Increase (%) = 100

= 8.5%

23.80

Sales growth per week = 0.085 x $500,000 = $42,500

32

GOT GROCERIES?

33